MPL CONSTRUCTION.pdf

7/28/2019 MPL CONSTRUCTION.pdf

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A consistent method of calculation of Probable Maximum Loss for buildings underconstruction or undergoing refurbishment

by Keith Mapp BSc CEng MCE Tech IOSHConstruction Underwriter

Zurich Global Corporate UK

Introduction

For the purposes of this paper the Probable Maximum Loss (PML) for a construction project isdefined as follows:-

The Probable Maximum Loss is an estimate of the maximum loss which could be sustained by theinsurers as a result of any one occurrence considered by the underwriter to be within the realms of

probability. This ignores such coincidences and catastrophes which are remote possibilities, but whichremain highly improbable.

The PML is an important part of the underwriting process as it helps Underwriters to decidehow much (what proportion) of a risk they can retain, and whether they need to purchasereinsurance for their share of that risk.

It is important that the PML assessment is neither excessively high, nor excessively low:

If it is set too high, the Underwriters will be buying reinsurance cover that they do notreally need, or retaining smaller shares of risks than they could otherwise hold. In eithercase, premium income and the potential for profit will be curtailed.

If it is set too low, then rates could be set too low and there is an increased risk that thechosen figure will be exceeded by a loss, which also affects their profit/loss ratios and affects

their credibility and relationships with their reinsurers.

For construction cases, PML assessments are normally made only for four of the six coverscommonly provided these being

Contractors All Risks (CAR) cover Existing Structures cover Non-Negligent Damage (JCT 21.2.1) cover Advance Loss of Profits cover(The other two covers Employers Liability and Public Liability are Casualty covers, for whichPML assessments are not normally made.)

This paper deals mainly with material damage calculations for the CAR class of cover.PML assessment for Existing Structures cover is discussed briefly in Appendix F


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The content of the paper is presented in the following sections:-Page

(1) The nature of construction project PMLs ........3

(2) Calculating material damage PMLs for buildings under construction orundergoing refurbishment(2.1) Basic considerations ....4(2.2) What is at risk? ...4(2.3) What is it worth? ....6(2.4) How much is likely to be damaged and to what extent? ......8(2.5) Development of the calculation method

(2.5.1) Part 1 - Low-rise Buildings ......8(2.5.2) Part 2 - High-rise Buildings ...11(2.5.3) The calculation method applied to low- and high-rise buildings 12

(3)

Why is collapse not considered to be likely?(3.1) General .14(3.2) Fires in completed buildings .16(3.3) Construction site fires ...21

Appendix A Material damage PML assessments Summary of the method .23Appendix B Examples of use of the method .25Appendix C Application to sites with more than one building .29Appendix D Treatment of special cases ....31Appendix E The effect of phased handovers .35Appendix F Calculating EMLs for Buildings Undergoing Alteration or Refurbishment ...37

Appendix G Limitations ..39


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(1) The Nature of Construction Project PMLs

PML assessment for construction cases can only ever be an inexact science at best, because:-

The nature and extent of damage is often difficult to predict, particularly if there are noexamples of previous, similar failures or events to use as a guide

The cost of repairing damage is often difficult to identify. The cost of building somethingfor the first time is often not a good indication of how much it will cost to repair or replaceonce it has been damaged. Construction companies only ever plan to build anything for thefirst time, and so do not necessarily have information available that will identify the coststhat are likely to be incurred following a loss.

An extreme example of this principle is the work that was done to repair and recover thecollapse of the Heathrow Express railway tunnels in the central area of Heathrow Airport inLondon, where the repair cost is reported to have been many multiples of the original

construction cost of the parts that were damaged.

The actions required to rectify damage can sometimes bear no similarity to the work thatwas done to create the thing that has been damaged. This makes estimating costs even moredifficult. The Heathrow tunnel case described above is an example of this. Anotherexample would be smoke or soot damage to, say, the finishes in a building following a fire.

As the Contractor, at the outset, would not have been expecting to have a fire that wouldcause damage of this type, details of the costs involved in repairing it / putting it right wouldnot be readily available prior to the event occurring.

The conditions that will operate to create the event that will produce the PML scenario lossare not evident at the underwriting stage, or even when Risk Engineering surveys are carriedout, and so are not capable of evaluation by direct inspection. This introduces a margin forerror that must be approached with judgement, experience, common sense and a certainamount of innate conservatism.

PML assessments in construction insurance are normally carried out at underwriting stage,when nothing of the completed project is available to be inspected other than a few drawingsand, possibly, some artists impressions. Even the drawings and pictures give away littleabout the construction process as they only show the completed item, with none of thetemporary works, stored materials and equipment, temporary accommodation, parked

vehicles, mobile plant, gas bottle stores, fuel/oil tanks and the like that will be present on the

site during the course of the project, creating potential hazards and risks. They also shownothing of the interim stages of construction, when the partly completed works may bemore vulnerable to damage than the finished item will be. Method statements aresometimes provided, and they can be of considerable help in this respect.

To combat this, Underwriters and Construction Risk Engineers will need to call upon all oftheir knowledge and experience of the construction process, of standards and practice in theindustry generally and of the standards and practice of the Contractor running the particularsite being considered in order to reach a measured and sensible view of the PML for theproject.

The insurance industry generally appears to be poor at learning lessons from past losses.There may be valid reasons for this Clients and Insurers may not want the size of


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settlements reached in particular cases to become common knowledge, for a variety ofreasons and confidentiality agreements might preclude the possibility of either partyreleasing details of payments made. Whatever the reason, reliable databases or lists of pastclaims and what they were worth do not appear to be readily available; something that

would be very useful to everyone involved when trying to predict the potential size of

possible future losses.

Some information can be found:- in copies of Loss Adjusters reports that might have beenarchived; from anecdotal evidence available from people working in the various InsurersUnderwriting and Claims departments; from trade journals and the like, reporting onproblems and losses that have occurred.

(2) Calculating material damage PMLs for buildings under construction or undergoingrefurbishment(2.1) Basic Considerations

The PML being considered here is that for the CAR section of the policy, arising from materialdamage to the works during the course of construction.

The PML scenario for buildings is almost invariably a fire, at a late stage in the constructionprocess, when most of the contract value has been spent/installed, but when some or many ofthe features and systems that will provide the finished product with its protection are either notcomplete, not commissioned or not working e.g. fire walls not completed; fire doors notinstalled or wedged open; fire detection and sprinkler systems not working.

The process of calculating the PML is best considered as comprising three parts, which presentthree questions to be addressed:-

What is at risk? What is it worth? How much of it is likely to be damaged, and to what extent?

Answering these three questions in turn provides a systematic approach to the calculation of thePML.

(2.2) What is at Risk?

Answering this question allows a determination to be made of what is what is often termed theTarget Risk. (This is a term commonly-used in Property Insurance and so is judged to beappropriate here.) The Target Risk is most easily defined as that part of the insured propertythat is judged to be at risk of damage in the loss scenario being considered. It is best illustratedby several examples:-

For a construction project consisting of a single building, the Target Risk is simply thebuilding itself, unless that building is effectively sub-divided, as there is nothing else that isinsured under the policy that the fire can spread to.


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For an explanation of the term sub-divided see the last paragraph of this section.

For a construction project consisting of a number of separate buildings, what is included inthe Target Risk is determined by the degree of separation between those buildings, from thepoint of view of fire spreading.

The simplest form of separation to see and understand is the distance between the buildings. Ifthey are far enough apart, the fire will not spread from one to another. Authoritative guidanceon separation distances presented in a concise and easy-to-apply form is hard to find, so astandard commonly used in Construction Risk Engineering is 10 metres. This figure isconsistent with the recommended separation distance for temporary buildings and the buildingunder construction set out in The Joint Code of Practice on the Protection from Fire ofConstruction Sites and Buildings Undergoing Renovation, and with much general PropertyConservation guidance on adequate separation distances in city and town centre locations.

The figure of 10 metres has to be treated with caution, however, as a number of features of

buildings under construction can erode or even negate what at first appears to be an adequateseparation distance. Examples of such features are:-

Scaffolding on the outside face of buildings Temporary buildings placed between buildings being worked on Storage of combustible materials, combustible waste, plant, fuel/oil, gas bottles etc. in the

gaps between buildings

Buildings with high inherent fire loads e.g. timber-framed buildings have been shown byexperience not to be adequately separated when placed 10 metres apart (reference the fire inColindale in 2006). For this type of building a minimum separation distance of 20 metres isindicated.

So, for a project comprising a number of separate buildings, all of similar size and construction,all having adequate separation, the Target Risk is simply the most expensive amongst them.

For a project comprising a number of separate buildings with adequate separation but withdifferent forms of construction and/or of different sizes, it may be necessary to consider each oneindividually with regard to the extent and value of likely damage; but the separation distancemeans that each one can be considered as being independent of the others.

For a project comprising a group or groups of buildings that do not have adequate separationdistance between them, the Target Risk is the group that would produce the largest loss in thescenario being considered. Several calculations may be needed to establish which of the blocks

forms the Target Risk, if it is not obvious from inspection of the layout, building size, buildingconstruction, value etc.

Another form of erosion of separation distances is the existence of common basements beneathgroups of buildings that, above those basement levels (from ground floor upwards), do haveadequate separation. This is becoming increasingly common on large developments of officesand apartments mainly. In this case, the presence of the basement has to be carefullyconsidered. Some of them, by virtue of the location, or lack, of lift shafts, staircases and servicerisers (i.e. not connecting directly with the buildings above) can be considered to be separatefrom the buildings above them. Others, where lift shafts, stair wells etc. lead directly up into thebuildings above them, cannot be considered as separate unless there is certainty that there will be

no continuity in fire load between basements and superstructures, thus making it very unlikelythat fire will be able to spread upwards from one to the other.


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Effective sub-division within a building can only be achieved by the presence of a properly-constructed and maintained compartment wall and/or compartment floor, with no openings atall in either one of them. Definitions of what these are and the standards they must comply

with are contained in the Loss Prevention Council (LPC) Building Construction Design

Guides, National Fire Protection Association (NFPA) Standards and other authoritativeguidance on fire protection. Neither one is very likely to be encountered on a construction site.Compartment walls are almost never seen, and floors on construction sites will almost alwayshave openings in them, until immediately before the date of Practical Completion andhandover.

(2.3) What is it Worth?

Answering this question allows the value of the Target Risk to be determined.

The figure the Underwriter or Construction Risk Engineer determines at this stage is the overallconstruction cost of the Target Risk, as given by the figures available at the time. Thisrepresents the largest possible loss that can be incurred from the Target Risk. This figure will beadjusted downwards to become the largest probable loss, and therefore the PML, in the finalstage of the assessment. The figure thus produced represents the material damage PML, whichUnderwriters then amend by adding other costs, as determined by the applicable insurancepolicy, to arrive at the final PML figure. Other costs cover factors such as debris removal,inflation, price escalation and others. They are not dealt with in this paper.

The quality of information provided on values of buildings under construction can be variable.Sometimes there is almost none at all and estimates have to be made to fill in the gaps.

Sometimes there is far too much, making analysis of the cost of various parts a time-consumingexercise. Quite often the amount provided is reasonable, making the exercise of determining thevalue of the Target Risk reasonably straightforward.

The best place to find the information that is needed is the cost breakdown for the project. Thisis a brief presentation (on no more than a few sides of A4, normally) of the overall costs forsignificant elements of a building or project. A typical (simple) example might be as set outbelow:-

Block Item Cost

A Foundations & substructures xxxxx millionSuperstructure xxxxx millionExternal cladding xxxxx millionInternal walls xxxxx millionRoof coverings xxxxx millionM&E plant & services xxxxx millionInternal finishing floors, ceilings etc. xxxxx millionInternal fixtures & fittings xxxxx million

B Foundations & substructures xxxxx millionSuperstructure xxxxx millionExternal cladding xxxxx millionInternal walls xxxxx millionRoof coverings xxxxx million


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M&E plant & services xxxxx millionInternal finishing floors, ceilings etc. xxxxx millionInternal fixtures & fittings xxxxx million

Site wide Demolition and site clearance xxxxx million

Enabling works xxxxx millionService diversions xxxxx millionExternal works/landscaping xxxxx millionPreliminaries xxxxx million

More detailed information might be provided in a costed bill of quantities, from which a moreaccurate assessment of the PML might be compiled, but the type of information set out above isnormally adequate for purpose.

Addressing the answer to the question What is it worth? for the example outlined above leadsto the following:-

Assuming that Blocks A and B are separate, and that A is identified as the more expensive of thetwo and is therefore the Target Risk, the following sets out the means of determining the valueof the Target Risk:-

The cost of Block As foundations and substructures can be omitted from consideration, asthey are unlikely to be damaged by a fire

The cost of Block As superstructure, external cladding, internal walls, roof coverings, M&Eplant & services, internal finishings, fixtures and fittings are all included for consideration asthey are all intimately involved in and with the fabric of the building and are therefore at

risk of damage in a fire

The cost of demolition and clearance of the site is a one-off initial cost that would not needto be repeated. (Underwriters will add in an amount to allow for removal of debris(following the fire) during their consideration of the PML.)

The costs of the enabling works and service diversions are one-off initial costs that wouldnot be repeated, as the works covered by them would not be damaged by a fire in thebuilding. They are therefore omitted from consideration.

The cost of external works and landscaping are omitted from consideration as the worksthey cover are external to the building and would not be damaged by a fire within it.

Preliminaries are normally omitted from consideration as they frequently represent one-offsite mobilisation and set-up costs that would not need to be repeated after the fire. It ispossible, however, that they also contain some repeatable elements, such as temporarybuilding hire, running and maintenance costs. The view normally taken is that that thesecosts are small compared with the overall values being considered so, unless specificinformation is available to the contrary, they can normally be omitted. Alternatively theycan be added in once the other construction costs have been apportioned as included inand excluded from the value of the target risk pro-rata those values.


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The sum of the figures denoted for inclusion in the lists set out above therefore gives the overallvalue at risk in the Target Risk. An example of the use of this process is included in Section(2.5.1) of this document.

If Blocks A and B were not found to be separate, the calculation outlined above would have

been done with the value of the relevant parts of Block B included.

Aggregations

Whilst an Insurers construction risks and property risks are normally insured separately, thepossibility of a construction PML scenario event involving surrounding property does need to beconsidered so that the overall exposure from the same event can be considered by Underwriters.This is not discussed in detail in this document.

(2.4.) How much of it is likely to be damaged, and to what extent?

This is the stage at which the PML Scenario and the cost information are combined to producethe material damage PML assessment. It is where an assessment has to be made of the likelyextent of damage. Section 2.5 describes the development of a method for producing consistentcalculations of the material damage PML for buildings under construction and undergoingrefurbishment.

The readers attention is drawn to the General Conditions applying to the use of this methodof evaluating the likely extent of damage. Buildings deviating from these conditions will requirespecial consideration as it is likely that they will represent higher levels of risk and the potential

for a greater extent and value of damage. These considerations are discussed in the Appendicesat the end of this document.

(2.5) Development of the calculation method

(2.5.1) Part 1 Low-rise Buildings

The following General Conditions apply to the basic calculation. Later Appendices to thisdocument provide information on extending the method to situations that do not comply withthe conditions. These are highlighted in the relevant places.

This method considers a single building in isolation. See Appendix C for information ondealing with situations where the Target Risk contains more than one building.

The PML scenario being considered in all cases is a fire at a late stage in the constructionprocess, when the value of the work done is at or approaching a maximum, but when thefeatures/systems/procedures that will afford protection to the finished product are either notpresent, not completed, not commissioned or not working.

The contractor in control of the site is of known or assessed quality: known or shown atsurvey to have good management standards and procedures; in particular:-


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- A good level of compliance with Fire Prevention on Construction Sites, the Joint Codeof Practice on the Protection from Fire of Construction Sites and Buildings UndergoingRenovation or an equivalent standard

- Good hot work controls- Good housekeeping standards/procedures

- Good security standards/procedures

Non-combustible construction for the building fabric, with adequate passive fire protectioni.e. new-build, complying with legislative standards/requirements, or refurbishment wherestructural fire protection is being upgraded to modern standards*

A low volume of combustible materials incorporated in fixtures and fittings installed duringfit-out stage*

Adequate response from the fire brigade and adequate fire-fighting water supplies Good subdivision of the building horizontally by solid floors with a limited number and size

of openings, and no atria*

* Buildings with significant volumes of combustible materials incorporated in the structure, or highvolumes of combustible materials in fixtures and fittings, or having atria inside them, or with

poor/inadequate levels of passive fire protection are all special cases and need to be consideredindividually.

With these conditions satisfied, the extent of the fire and the degree of damage sustained isdefined as follows:-

Fire breaks out on one floor and spreads upwards to the floor above. The floors directlyaffected by fire are referred to as the Fire Floors.

Direct damage due to fire is equal to 100% of the value of the two Fire Floors Damage due to smoke to the value of 50% of the floor immediately above the fire Damage due to fire-fighting water to the value of 50% of the floor immediately below the

fire

Note - This is not necessarily the way the damage would be distributed in a real fire, but ispresented as a means of arriving at a figure representative of the extent and value of that damage.

Collapse of the whole structure is not considered to be a likely occurrence, except:- In the case of single storey buildings, where fire resistance of the structure is generally not

required.

In the case of two storey buildings, where the collapse of the unprotected structure of theupper storey is likely to subject the lower storey of the building to loads it is unable to

withstand.

In such cases the estimated loss is already set at 100% of the superstructure value, so the risk ofcollapse is automatically allowed for.

As the building increases in height it is likely to become more robust and more able to withstand

failure of the structure of the roof framing without being at risk of catastrophic failure. At threestoreys, four storeys etc. the proportion assumed to be lost decreases progressively. See Section 3


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of this document for a discussion of the reasons why collapse is not considered to be likely inbigger buildings.

Where the value of the floors is known not to be equal, the location of the fire can be moved upand down the height of the building in order to maximise the loss.

Assuming that the cost of the building is equally distributed on all floors, the cost of the damageto the building superstructure can be stated generally as follows for buildings of differentheights:-

Building height Extent of damage (% of superstructure value)Single-storey 100Two-storey 100Three-storey 83Four-storey 75Five-storey 60

Six-storey 50Seven-storey 43Eight-storey 38Nine-storey 33

As building height increases, the extent of the damage decreases. This is judged to bereasonable, up to a point, as experience shows that there is a certain base fire load involved inconstructing any building and that, as the building size increases, the fire load becomes morethinly spread, making fire spread less likely and fire fighting easier. The point at which thisbecomes unreasonable is when the building reaches a size where its height begins to impede theability of the Brigade to fight the fire. This is generally accepted to be when the building reaches

6 storeys above ground level. Section (2.5.2) deals with High-rise Buildings.

The final part of this section presents an example of the determination of the value at risk for asingle building. Cost breakdowns provided by Clients and Brokers typically give theconstruction cost for the major elements of the building being worked on. These can be used tocompile a list of those items that are likely to be involved in the PML scenario fire and thosethat are not, as set out below. The included items are those that would need to be repeated ina rebuilding process if the building were to be completely lost in a fire. For example, sitepreparation would not need to be repeated and is therefore excluded, nor would the foundationconstruction, basement excavation or basement structures. Clearly there would be damage andloss to items such as floors, ceilings, internal walls, external cladding, windows, services etc., so

their costs are included.

Item Included (m) Excluded (m)Site preparation - 0.48Piling - 1.41Basement excavation & concrete - 9.31Superstructure 10.00 -Envelope 16.61 -Mechanical & Electrical installations 17.13 -Internal walls & linings (& ceiling) 6.35 -Fit-out (residential) 7.00 -Lifts (residential) 1.36 -Builders work in connection with services 0.45 -Fit-out (hotel) 5.13 -


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Specialist leisure 0.59 -Lifts (hotel) 1.14 -Contingency (all included) 9.47 -Enhanced fit-out 4.00 -External works - 2.50

Design development 0.50 -Interim totals 79.73 13.70(85%) (15%)

Site preliminaries (pro-rata) 3.40 0.60Site staff (pro-rata) 5.00 0.87

Totals 88.13m 15.17m

The percentage extent of damage figures set out above are applied to the figure determined asincluded in the PML scenario fire. So in this case, if the building was single-storey or two-storey, the loss would be 88.13 million. If it was three-storey the loss would be 83% of 88.13million i.e. 73.1 million. If it was four-storey the loss would be 75% of 88.13 million i.e.

66.10 million, and so on.

(2.5.2) Part 2 - High-rise Buildings

The approach adopted for high-rise buildings aligns with that used by the PropertyConservation discipline.

The same conditions apply here as for low-rise buildings.

The extent of damage in the PML scenario fire is defined as follows:-

Fires on floors up to and including fifth floor are assumed to be dealt with satisfactorily bythe local fire brigade/fire department.

Fires above the fifth floor are assumed to be too high up the building to be dealt witheffectively and to run away up the building, out of control, until they either reach the roof orreach a floor that is free of any combustible material and will therefore act as a fully effectivefire break. This latter situation is rare during construction, and so is not normally taken intoaccount.

Damage is assessed as 70% of the value of all Fire Floors, plus15% of the value of all floors below the fire for water damage

This gives the following extent of damage to superstructure:-Six-storey - 24%Seven-storey - 31%Eight-storey - 36%Nine-storey - 39% OR For all above 5:- (70 x (N-5) + (15 x 5))/ N%Ten-storey - 42% - where N = number of storeysEleven-storey - 45% (tends to 70% when N = infinity)Twelve-storey - 47%Thirteen-storey - 49%


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(2.5.3) The calculation method applied to low- and high-rise buildings

When the results obtained for low-rise and high-rise buildings are combined and expressedgraphically, the result is as shown below:-

EML Assessment

0

20

40

60

80

100

120

1 2 3 4 5 6 7 8 9 10 11 12 13

Storeys

Percentage

Loss

Construction

GC Low-rise, non-combustible

GC Low-rise, fire-resistive

GC high-rise

The graph presents four lines. These are:-(A) Dark blue )

this is the line for low-rise buildings under construction ) These two are the most(B) Turquoise ) relevant of the four

this is the line for high-rise buildings under construction )(C) Yellow )

this is the line for the Property discipline, low-rise buildings, )fire-resistive construction ) The relevance of these

(D) Purple ) lines is explained laterthis is the line for the Property discipline, low-rise buildings, )non-combustible construction

The interesting and useful feature is the approximate meeting of three of the plotted lines at the

eight-storey building height- the Construction curve (Version 1 of this method)- the Property low-rise, non-combustible curve- the High-rise curve

This offers the opportunity to adopt and use a numerically consistent method for buildings ofall heights, by adopting the Construction curve for buildings up to and including eight storeysin height, and the High-rise curve for those that are taller than eight storeys.

The Construction curve used for low-rise buildings predicts a greater extent of damage than theequivalent Property discipline curves. This seems logical on the grounds that buildings under

construction generally have more unprotected floor and wall openings than the same buildingswill have when they are completed.


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Adopting the finished building curve for high-rise buildings under construction can also bedefended, using the argument that, although the same floor openings, wall openings, servicerisers etc. exist inside them, the fire load is far more thinly spread than in smaller buildings, andits density is far lower than will be present once the work is finished and the building is handed

over.

For information and completeness, the Low-rise Property discipline curves were derived asfollows:-

Low-rise buildings, non-combustible construction, with conditions similar to those set outfor the construction method:-

- fire damage on three floors to 70% of the value of each of those floors, plus- smoke damage on the two floors above the fire to 20% of the value of each of thosefloors, and 10% on the rest

- water damage on all floors below the fire to 15% of the value of each of those floorsThe location of the fire floors is varied to maximise the extent of damage if that was

appropriate e.g. if floor values were known and were different from one another.Assuming that all floors are equally valued, this gives the following extent of damage tosuperstructure:-Single-storey 70%Two-storey - 70%Three-storey - 70%Four-storey - 58%Five-storey - 50%Six-storey - 44%Seven-storey - 40%Eight-storey - 37%

Nine-storey - 34%

Low-rise buildings, fire-resistive construction, with conditions similar again:-- the same as for the non-combustible version, but with direct damage due to fire

restricted to 50% to reflect the better fire performance of the structure.This gives the following extent of damage to superstructure:-Single-storey 50%Two-storey - 50%Three-storey - 50%Four-storey - 42%Five-storey - 38%

Six-storey - 34%Seven-storey - 31%Eight-storey - 29%Nine-storey - 28%

Section (2) Summary

Provided that the conditions set out in Section (2.5.1) are met, the PML for a single buildingunder construction can be calculated as follows:-

For buildings up to and including 8 storeys in height above ground level 100% of the value of two floors direct damage due to fire


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50% of the value of the floor above the fire smoke damage50% of the value of the floor below the fire water damageThe Fire Floors should be located such that the value of the damage is maximised

For buildings greater in height than 8 storeys above ground level 70% of the value of sixth floor and above15% of the value of all floors below the sixth for water damage.

(3) Why is Collapse Not Considered to be Likely?

(3.1) General

Building collapse in fire does occur occasionally, but is too infrequent to be regarded as probablein the context of Probable Maximum Loss estimation. This conclusion is supported by researchcarried out for the National Institute for Standards and Technology (NIST) in America

(Contract Number NA 1341 -02-W-0686) by J J Beitel and N R Iwankiw, both of HughesAssociates Inc. after the terrorist attacks on New Yorks World Trade Centre in 2001. Thereport of this research is entitled Historical Survey of Multi-Storey Collapses Due to Fire.This was a search of historical data, looking for evidence of collapse of buildings during fires. Itsdata was drawn from records dating back to the 1950s, mainly from North America.

Table 1 of the report of this research lists 22 case of collapse or partial collapse over that timeperiod. Of these, four are World Trade Centre, New York, buildings and so can be discounteddue to the exceptional circumstances that prevailed in that location at the time see later text inthis section on that subject. One was the partial collapse of part of The Pentagon building, onthe same day, caused by fire following aircraft impact. Two involved the collapse of wooden-

framed buildings that are clearly outside the scope of this method. Eleven were partial collapsesof varying degrees, the extent of damage described being judged to be within the extent thatwould have been predicted by the application of this method. That leaves four cases that weretotal collapses that were attributable just to fire (and with further investigation it might beshown that two of these (at least) were outside the scope of this method due to the form ormaterials of their construction). The report also states that annual occurrences of fire inbuildings of 7 storeys or more exceeds 10,000. If that is true, then over the study period,assuming it encompassed the 45 years from 1957 to 2002 and covered just the USA (which itclearly did not) then those four cases represent a rate of collapse of 1 in 112,500 of the buildingsthat suffered a fire. To calculate the absolute probability of collapse, that figure would have tobe modified to allow for the probability that any particular building would suffer from a fire,

making the probability of collapse even smaller. Is this within the bounds of what is probablewhen considering PML estimates? Probably not.

Moving on now to some specifics:- collapse of a building frame will occur when its structure isexposed to a fire that weakens it to the point where it can no longer support the loads that areapplied to it. The two types of building frame we are primarily concerned with here arereinforced concrete and structural steel.Reinforced concrete has inherent fire resistance built into it by virtue of the thickness of theconcrete covering the steel bars that reinforce it. It is inherently fire-safe, therefore, as soon asit is cast and has cured.Steel is protected by adding protective layers in the form of intumescent paint, sprayed-on fire

protection or fire-resistant boarding. Intumescent paint is normally applied at the steelfabrication works and so is present on the frame components when they are delivered to the site.


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The others are added to the steelwork at an early stage after its erection on site, as they cannoteasily be added once other work inside the building has commenced. The effect of this is bestillustrated by considering a case-study dealing with the construction of a new laboratorybuilding.

Details of the laboratory building construction process are set out below, in graphical form.

Programme months1-32 Builders attendance & profit - 1.75m1-10 Substructure - 7.87m

10-20 Frame &floors 7.85m12-22 Fire protection 2.5m

15-21 External cladding 5.35m16-22 Extnl drs & windows 2.15m

17-25 Internal walls & partitions 5.05m18-26 Services Phase 1 8.65

20-23 Roof covrs 1.45m20-27 1st fix carpentry 0.65m

21-28 Lifts 2.35m21-26 External works 0.85m

22-29 Suspended ceilings 1.35m23-29 2

ndfix carpentry 0.65m

23-30 11.15m Services Phase 227-30 1.75m Floors27-30 3.55m Fin/furn

The fire protection is applied to the building frame very soon after the erection of any givenfloor, and is complete at every level before that level is enclosed by the cladding and before thereis any appreciable volume of combustible materials included inside the building at that level.

The material damage PML assessment for this ten storey building is as follows:-

Sum at risk = 64.89m - 7.87m (substructures) - 0.85m (external works) = 56.17mDamage percentage = (70% x 5/10) + (15% x 5/10) = 42.5%Material damage PML = 0.425 x 56.17m = 23.8m

Analysis of the cumulative spending curve for the project shows that this figure is reached duringthe twenty-first month of the project, by which time almost all of the fire protection is in place,but the work in progress is still dealing at that time with essentially non-combustible materials.So, even if was possible for a fire to trigger a collapse at an early stage, before the fire protection

was in place, the sum at risk would be very unlikely to equal or exceed the sum calculated as thePML for the later fire scenario.

The view that collapse is improbable is also supported by the available anecdotal evidence onfires in multi-storey buildings from around the world, both from construction projects and frombuildings post-completion. Collapses have occurred, and these are sometimes held up as proofthat such buildings are not capable of surviving such fires. Close examination of the availableevidence proves the point the other way, however.


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(3.2) Fires in completed buildings

The World Trade Centre, New York

The most prominent case(s) of collapse of large buildings during fires in recent years involved

buildings 1, 2 and 7 on the World Trade Centre (WTC) site in New York in 2001. All threecollapsed in full view of the worlds media and were initially held up by some as providing proofthat steel-framed buildings were not as safe in fire as they had been thought to be up to thatpoint in time. Others, the so-called conspiracy-theorists, use the fact that no other largebuildings have ever collapsed solely due to fire as the primary reason for promoting their theoriesthat the buildings were deliberately brought down by demolition charges.

In the years that have followed the terrorist attack on the WTC, the National Institute ofStandards and Technology (NIST) in America has been investigating the collapses to establish,as best they could, the sequence of events that led to them happening. The circumstancessurrounding the collapse of WTC 1 and WTC2 were broadly similar, with some differences in

detail that led one building to collapse before the other (in a shorter time after impact of theaircraft). The final report of this investigation has been published and is commented on below.The investigation into the collapse of WTC7 was not complete when this paper was written.The comments made below on this building are based on preliminary reports that are thoughtto reflect broadly what will appear in the final report when it is published, some time in 2008.

WTC1 and WTC2 were both struck by fast-moving, heavily-laden airliners on the morning ofNovember 11th 2001. These were deliberately flown into the buildings, presumably in the hopethat they would bring the buildings down. On impact with the buildings, a number of thingshappened:-

The aircraft substantially disintegrated, with most of the debris coming to rest inside, butwith a number of major components - notably wheels and the main shafts of the engines -passing straight through and falling to ground or onto the roofs of buildings on the otherside.

The initial impacts with the face of the buildings severed a number of outer steel columns,and severely damaged others, leaving those faces of each structure considerably weakened.

The remains of the aircraft, mainly small pieces carrying high energy, spread over a wide areaand a number of floors inside the buildings causing considerable internal damage including:severing of a number of steel columns in the cores and causing severe damage to others;

causing parts of several floors on the impact side to collapse onto the floors below; removingthe sprayed fire protection from the steel trusses supporting the floor slabs over a wide areaon a number of floors. In WTC2, one of the very heavily-loaded corner columns in the core

was severed by the off-centre impact of the aircraft that hit it, a major contributory factorleading to the collapse of this building first, although it was the second to be hit. The high-energy debris also stripped away most or all of the fire-protective boarding in the cores on theimpact floors, leaving the steelwork there exposed to the fires that would follow. This was akey factor in the collapse of both buildings.

Jet fuel spilled both inside and outside the buildings and was ignited, by the friction and heatof the impact, by the hot components in the aircraft and by other sources of ignition

mainly electrical equipment inside the buildings. NIST have estimated that the fireballsseen as the aircraft impacted the buildings constituted only a proportion of the fuel on board,


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with the rest travelling into the building interiors. Some of this was atomised and involved inthe vapour cloud explosions. The rest was deposited as liquid to burn and ignite the buildingcontents.

The fires that followed consumed both the aviation fuel and the building contents. Thecolumns and beams of the building frames and the trusses supporting the floors, all strippedof their fire protection, began to heat up. This led to a transfer of load from the perimetercolumns to the columns in the core via a stiff structure at each roof level referred to as thehat-truss*, as temperature differentials caused the core columns to expand more rapidly thanthe perimeter columns did. This effect was exacerbated by the load redistribution that hadalready occurred between the outside faces of the buildings as they coped with the loss ofstructural integrity at the impact sites.

* The hat-truss was a substantial steel structure built into the top section of each building toallow it to carry the load of a television tower on its roof, by distributing its load evenly to allperimeter and core columns. The presence of these trusses made the buildings more robust than

they would otherwise have been, and are thought to have increased the time they remainedstanding between impact and collapse.

As the fires continued to burn, the exposed steel grew progressively hotter and began to losestrength. Large loads and high temperatures caused the core columns to shorten, sheddingload back out to the perimeter columns via the hat-trusses. The floor slabs, where they werestill attached to the core and perimeter columns, were sagging and beginning to pull theperimeter columns inwards a deflection of around 1.4 metres has been estimated fromphotographs of part of the external wall of one of the buildings shortly before final collapsebegan. As this process continued, the perimeter columns on the deflected sides failed bybuckling inwards, triggering rapid progressive failure of the rest of the structure at that level.

When this progressive collapse occurred, the section of each building above that level beganto move downwards. WTC2 fell first, despite being the second to be struck, because the lossof the corner column in its core accelerated the load transfers that led to its final collapse. Inboth cases, the section of the building above the impact floor was intact, so when it fell itcarried a huge store of energy with it, that the structure of the building below the level ofimpact was not strong enough to arrest and stop once it had begun to move.

Although some details of the way the progressive collapse began were different in each case,both buildings fell in more or less the same way, with the top section falling down throughthe rest of the structure, peeling the outer walls open as it went. The forces produced were

so great that the concrete of the floor slabs was crushed and turned into the huge dust cloudthat accompanied each collapse. The perimeter steel frames were almost completelydestroyed, as were the core columns and beams.

Once started, the rate of fall was rapid not very much slower than the rate of free-fall underthe effects of gravity. This is not judged to be, as the conspiracy-theorists have stated, anindication that explosive demolition was used to assist the collapse, but more a measure ofthe huge energy contained in the falling sections, above the impact floors, measured againstthe small resistance offered to the collapse by the structure below it.

WTC7 stood a short distance away from WTC1. It was not hit by an aircraft, but was hit anddamaged by large pieces of debris thought to be sections of the perimeter wall when WTC1


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fell. This caused damage to the building of an unknown extent and started fires inside it in anumber of places and at a number of levels. Some time later the building completely collapsedin a manner that has been likened to that observed in a collapse triggered by controlleddemolition. Once again, the conspiracy-theorists have claimed that controlled demolition wasused, while others have claimed it as the first collapse of a major building caused solely by a fire.

In reality it is neither of these, as the preliminary investigation results show and as the finalreport will probably show. Yes, it did collapse because there was fire inside it, but that was notthe only cause, so to attribute it just to the fire is not correct.

Interest in the collapse of WTC7 centres on an area inside the building between the 5 th and 7thfloors, directly below the eastern rooftop plant room where the final collapse was first seen to behappening. At this level there was a transfer structure, used to convert one column layout, usedbelow this part of the building, to another, used above. This was included in the design of thestructure for two reasons:-

(1)The building was constructed in two phases, with a time delay between the two, and(2)To allow a substation to be incorporated within the buildingThe two construction phases involved the foundations and substructures (first) and thesuperstructures (afterwards). As is sometimes the case with this type of development site, thefoundations and substructures were built speculatively, with later bespoke design andconstruction of the rest of the building on top of them. As is also sometimes the case, thecolumn layout of the building when it was finally designed did not suit the foundation layout asbuilt, so there was a need to incorporate a transfer structure of some kind within it. This wascombined with the need to install the substation, and a design compatible with both needs wasdeveloped.

The transfer structure as-built included a row of deep steel beams with long spans andcantilevers transferring offset column loads along one side of the building, plus three two-storeytruss systems doing a similar job in two locations at its heart. Also in this part of the buildingthere were a number of diesel-powered generator sets forming part of the back-up power supplysystem, along with their associated fuel tanks and pumps. It is suspected that the collapse of thebuilding was caused by a chain of events triggered by the terrorist attacks on WTC1 and 2, themain elements of which are as follows:-

The collapse of WTC1 and/or WTC2 cut the incoming power supply to the building,causing the diesel engines powering the back-up generators to start up and run, in order to

maintain power to computers etc. inside it. One or more of these pumps is thought to havebeen connected to a UPS system.

When WTC1 collapsed, WTC7 was hit in several places by debris form its outer walls.WTC7 was damaged, and several fires broke out inside it.

Fire-fighting response and water supplies were severely impaired due to the size and severityof the problems in the area at the time, so the fires in WTC7 received less attention than theyotherwise would have done.

A number of hours after WTC1 collapsed, the roofline of the eastern plant room on WTC7developed a kink where previously it had been straight. Within a fairly short space of timeafterwards, that plant room disappeared into the building, followed by the adjacent western


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The presence of abnormal fuel loads to assist the growth and duration of the fires aviationfuel in WTC1 and WTC2; a continuous supply of diesel oil in WTC7.

The disrupted fire-fighting effort in place at the time.

The Windsor Tower, Madrid

The second case-study of a completed building fire is that involving the Windsor Tower inMadrid, which suffered partial collapses and was later demolished after a serious fire in February2005.

This building, originally constructed in the 1970s, was undergoing a major renovationprogramme at the time that the fire occurred and was still at least partly occupied. It had aheavy fire load in the occupied areas. It had no sprinklers in or above the area where the firestarted as they were being fitted as part of the work being done during the renovation project.

The building structure comprised a reinforced concrete core, with reinforced concrete floor slabsspanning from the core walls onto steel columns positioned on the building perimeter. At thetime of building, there was no requirement for the steel columns to be fire-protected, norequirement for the gaps between floor edges and the external cladding to be fire-stopped, andno requirement for sprinklers to be installed. All of these deficiencies (when compared withmodern standards) were being addressed during the refurbishment programme. At the time ofthe fire, the refurbishment work, which was being carried out on a floor-by-floor basis, hadreached the seventeenth floor.

The fire broke out on the twenty-first floor and travelled in both directions upwards and

downwards - eventually engulfing the whole building down to the fourth floor level during thetwelve or so hours the fire burned before it was extinguished. After five hours, the floors abovethe seventeenth suffered a progressive collapse when the unprotected steel columns failed. Thefloors folded downwards against the face of the reinforced concrete core, which remainedstanding. The floors below the seventeenth, where the steel perimeter columns had been fitted

with passive fire protection, also remained standing. Eventually the whole building wasdemolished as it was judged to have been damaged beyond economic repair.

The cause of the fire was found to be an electrical fault on the 21st floor. Fire was able to spreadlaterally in an uncontrolled way due to the fire load present on this occupied, open-plan floorand the lack of sprinklers installed on this un-refurbished floor. Fire spread upwards easily due

to lack of fire-stopping between the cladding and the floor slab edges. Fire spread downwards inthe upper section, above the refurbished floors, for the same reason and because windows brokefrom exposure to heat and through impact with falling debris. Below the seventeenth floor,

where the refurbishment had been completed, downward fire spread was also from window towindow. There is also a suggestion that the cladding moved away from the slab edge due tothermal expansion of its framing, rendering the newly-installed fire-stopping ineffective.

Structural collapse was confined to areas above the seventeenth floor, due to the presence ofpassive fire protection to the steel perimeter columns below that level and the lack of it above. Ifthe passive fire protection had been in place on the steel perimeter columns through the rest ofthe height of the building it is very likely, judging from their performance on the lower floors,

that the collapses would not have happened. If the collapses had not happened it appears likely,


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from the evidence obtained from other large building fires (see following examples) thatdemolition of this building would not have been thought necessary.

One New York Plaza, New York

This fifty-storey high tower caught fire in August 1970, not long after it was completed. Thefire burned for more than six hours. Some partial collapses were experienced where sprayed fireprotection, then newly introduced, had failed to adhere to the steel members it was intended toprotect and fell off. No widespread collapse occurred, however, and none where the fireprotection remained in place. The building was repaired and re-occupied.

First Interstate Bank, Los Angeles

This sixty-two storey building caught fire in May 1988 and burnt for three and a half hours

before being brought under control by the fire department. Four and a half floors werecompletely gutted. The floors above the fire suffered smoke damage. The floors below the firesuffered massive water damage. In spite of the total burnout of four and a half floors, there wasno damage to the main structural members and only minor damage to one secondary beam anda small number of floor pans. It was noted during the recovery operation that the quality of thesprayed-on fire protection was particularly good. Property loss was estimated to be some $200million, including both building and contents. The building was repaired and re-occupied.

One Meridian Plaza, Philadelphia

This was a thirty-eight storey office building that suffered a large fire in February 1991. Firebroke out on the twenty-second floor and burnt for 18 hours, reaching the thirtieth floor whereit was controlled by the presence of sprinklers. The frame of the building was steel, cased inconcrete as fire protection. Damage was extensive but there was no collapse, and the building

was repaired rather than being demolished. Property loss was estimated to be some $100million, including both building and contents.

Parque Central, Caracas, Venezuela

In October 2004, twenty-six floors of this fifty-six storey building were damaged by a fire that

lasted for more than seventeen hours. Fire-fighting efforts were reported to have been impairedby inadequate supplies of water, so the fire lasted longer and caused more damage than wouldotherwise have been the case. No collapse was caused by the fire and the structure was repairedand put back into use.

(3.3) Construction Site Fires

The London Underwriting Centre, Mincing Lane, London

August 1991. Fire broke out in this seven-storey building during the course of fitting-out. Firespread upwards from the lower levels via the escalators that had been installed in the atrium,temporarily protected by combustible packaging and covering. Repair costs are reported to havebeen approximately 105 million. There was no collapse of structure.


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Fortune Tower, Jumeirah Lake Towers, Dubai

January 2007. Fire broke out on the upper levels of this thirty-seven storey tower during the

course of its construction. The reinforced concrete frame was complete, and work was inprogress on internal fitting-out and installation of the external cladding. There was no seriousdamage to the structure, although two workers were killed.

Shanghai World Financial Centre, China

August 2007. Fire broke out around forty storeys up in this one hundred and one storey towerwhile it was being fitted out and work was in progress on installation of its external cladding.The fire was put out relatively quickly and no serious damage was sustained by the structure.


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APPENDIX A

Material Damage PML Assessments for Buildings Under Construction

Use the method outlined on the following sheet for buildings that meet the following criteria:-

This method considers a single building in isolation. Further consideration of potentialaccumulation risk is required when several buildings are involved on a single site, or whereadjacent sites are at risk by exposure to one another see Appendix C of this document fordetails

The PML scenario being considered in all cases is a fire at a late stage in the constructionprocess, when the value of the work done is at or approaching a maximum, but when thefeatures/systems/procedures that will afford protection to the finished product are either notpresent, not finished, not commissioned or not working.

The contractor in control of the site is of known or assessed quality: known or shown atsurvey to have good management standards and procedures; in particular:-- A good level of compliance with the Joint Code of Practice, Fire Prevention on Construction

Sites (JCOP) or an equivalent standard- Good hot work controls- Good housekeeping standards/procedures- Good security standards/procedures Non-combustible construction for the building fabric, with adequate passive fire protection

i.e. new-build, complying with legislative standards/requirements, or refurbishment wherestructural fire protection is being upgraded to modern standards*

A low volume of combustible materials incorporated in fixtures and fittings importedduring fit-out stage*

Adequate response from the fire brigade and adequate fire-fighting water supplies Good subdivision of the building horizontally by solid floors, and no atria** Buildings with significant volumes of combustible materials incorporated in the structure, or highvolumes of combustible materials in fixtures and fittings, or having atria inside them are all special

cases and need to be considered individually.

(1) For buildings up to and including 8 storeys in height above ground level:-

Assume that fire breaks out on one floor and spreads upwards to the floor above.The extent of damage will be:-100% of the value of each of the fire floors50% of the value of the floor immediately above the fire for smoke damage50% of the value of the floor immediately below the fire for water damage

Single storey and 2-storey buildings will suffer a loss of 100% of the value of theirsuperstructure*3-storey buildings will suffer a loss of 83% of the value of their superstructure**


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4-storey buildings will suffer a loss of 75% of the value of their superstructure**

**Assuming they have no basements see Appendix B for modifications due to the presence of basements

In 5-storey to 8-storey buildings with unequal floor values, the position of the fire floors etc. canbe positioned to maximise the extent of the damage.

The extent of the damage (% of the value at risk) is then multiplied by the value at risk to obtaina figure for the PML.

(2) For buildings of 9 storeys above ground level and higher***:-

Assume that fire breaks out on the sixth floor above ground level and spreads upwardsunchecked to the full height of the building.

The extent of the damage will be:-70% of the value of each of the fire floors15% of the value of each of the floors below the fire for water damage

This can be summarised as follows:-Extent of damage = (70 x (N-5) + (15 x 5))/ N%- where N = number of storeys(tends to 70% when N = infinity)

*** This applies without modification if all floors are of the same (or approximately the same) area.Where the building has a low-level podium of a larger area per floor, consideration will have to be

given to the possibility that a scenario of the type outlined above in (1) in the podium will produce alarger PML estimate.

The extent of the damage (% of the value at risk) is then multiplied by the value at risk to obtaina figure for the PML.


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APPENDIX B Examples of the use of the Method

Example 1 tower of varying height & uniform cross section no basements

The position of the fire floors can be varied to maximise the extent of dif the value per floor varies (38% shown assumes uniform value pe

501010

50 5050 100

100 100 100 100 100 100 50

Extent of damage % of sum at risk

100 100 83 75 38


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Example 2 - tower of varying height & uniform cross section with basements

The position of the fire floors can be varied to maximise the extent of damage if the value per floor varies (figures shown assume uniform value per floor)

70 70 70

50 50 70

100 100 15 100 100 15 50 50 15

50 50 15 100 100 100 100 15 100 100 100 100 15

50 50

100 83 83 75 33 30 37


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Example 3 buildings having uneven cross section through their height

This example illustrates the relationship between tower height and the size of a podium at low lev- In the first building shown, a fire in the tower is the dominant feature

- In the second, with a larger podium and same tower height, fire in the podium becomes the dom- In the third, the tower is taller and once again becomes the dominant feature of the building

This shows that for buildings with varying cross sections through their height, several fire scenarioNeed to be evaluated to establish which produces the largest degree of damage

70 70 70 70 70 70

70 70 70 70 70 70 70 70 70 70 70 70 15 15 15 15 50 50 15 15 15 50 50 15 15 100 100 15 15 15 100 100 15 15 100 100 15 15 15 100 100

15 15 50 50 15 15 15 50 50

43 33 38 41


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Example 4 showing the influence of podium height

- In the building with a four-storey podium, fire in the tall tower dominates (32% versus 26% for - The same applies to the building with the five-storey podium, as the fire mechanism confines th- When the podium reaches six storeys the fire mechanism changes and both towers are affected

(in buildings with shorter towers the fire in the podium may be the dominant feature see previo

70 70 7070 70 7070 70 7070 70 7070 70 7070 70 70 70 70 70 70 70 70 70 70 70

70 70 70 70 70 70 70 70 70 70 70 70 15 15 15 15 15 15 15 15 50 50 50 15 15 15 15 15 15 15 100 100 100 15 15 15 15 15 15 15 100 100 100 15 15 15 15 15 15 15 50 50 50 15 15 15 15

32 26 32


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APPENDIX C

Application to sites with more than one building

So far, this method has only been applied to single buildings in isolation. Many projects

involve the construction of multiple buildings standing close to one another, so this mustbe considered when assessing PMLs. This section deals with the issue of how that mightbe done.

When considering such sites, the risk that fire will spread from one building to anothermust be taken into account. This is done by ensuring that they are far enough apart toprevent the easy spread of fire. Three things should be considered:-

(1) The physical distance between the subject buildings(2) The likely presence of any temporary buildings or other structures that could

bridge the gap and carry fire from one to the other

(3) The likely presence of any temporary works, materials or equipment storagethat might render the gap ineffective as a fire-break and carry fire from one tothe other

Considering point (1):-

The question of what is and what is not adequate separation between buildings is acomplex one, with a number of methods having been developed, requiring the input ofspecific information such as fire loads, compartment sizes, the area of external wall

penetrations expressed as a percentage of the overall area of the exposed walls etc. Muchof this is not available at the Underwriting stage, and much of it varies with time over thecycle of construction.

For the purposes of construction PML assessment this is judged to be too complex, dueto the complexity of the construction process and the factors outlined above. Instead, asimplistic approach has been adopted, which states that, for those buildings to which themethod applies, a nominal separation distance of 10 metres is adequate. This is based ontwo things:-

10 metres is the separation distance that was deemed to be adequate for multi-storeybuildings in city/town centre locations in the property insurance PML evaluationsused by the Property Conservation discipline

10 metres is stated as the ideal separation distance between temporary buildings andbuildings being constructed/renovated in Fire Prevention on Construction Sites, the

Joint Code of Practice on the Protection from Fire of Construction Sites andBuildings Undergoing Renovation. The thinking here is that the combined fire loadof a standard temporary building (one that is not compliant with the requirementsfor enhanced fire resistance etc. set out in the Joint Code) and its contents is likely tobe more intense (or dense) that the fire load of/inside a building that falls within thescope of this method. As that is the case, and as a separation distance of 10 metres is

judged to be adequate in that case, it is judged to be adequate in this context also.


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Where temporary buildings or other structures are positioned between the buildingsbeing considered, a judgement must be made on whether fire is likely to be able to spread

from one of those subject buildings to the other via the interveningbuilding(s)/structure(s). Normally it would be prudent to assume that only structurescomprising non-combustible materials concrete, steel, glass, aluminium etc. would fitthis description, and that any combustible structures and/or temporary buildings,

whether they comply with the enhanced requirements of the Joint Code or not, would belikely to carry fire from one of the subject buildings to the other.

Exceptions to this rule may need to be considered however; if, for example:-

The temporary buildings were positioned between the subject buildings for a shortperiod only at the start of a project and were to be removed before there was a

significant build-up of value or combustible content in the subject buildings. Wherethis is the case, two loss assessments might have to be made the first with twobuildings exposed at part full value the other with only one exposed at its full value(assuming the programmes for construction of the two are similar see below forfurther information on phased handovers).


Other features of the site/construction process can serve to decrease effective separationdistances between subject buildings; for example:-

Scaffolding; materials stores; combustible waste storage areas; equipment stores; fueltanks; anything, in fact, that could carry fire from one part of the site to another.

This is possibly the most difficult part of the process to evaluate, as it has to be based onan appreciation of how the construction process is to develop and how well it is likely tobe managed; which is why the conditions that apply to the application of the methodrefer to knowledge of and familiarity with the contractor.

Again, the presence of such conditions may be a temporary feature, relating to aparticular phase of construction work and, as a result, several loss assessments may needto be made to establish which of them represents the PML for the project.


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APPENDIX D

Treatment of special cases

Special cases are all cases that do not comply with the conditions set for application of thestandard method. The conditions, and a commentary on how cases that do not complymight be dealt with, are set out below:-

Condition:-The standard method considers a single building in isolation

Commentary:-Appendix C of this document shows how it might be adapted/applied to sites withmore than one building

Condition:-The PML scenario being dealt with here is fire

Commentary:-There are other possibilities hurricane, typhoon, earthquake, but they are outsidethe scope of this document and other guidance must be sought when dealing withthem

Condition:-The contractor is in control of the site and is of known or assessed quality

Commentary:-These firms can be relied on to have good controls on fire inception risks hot work,smoking, security against arson etc. and on the volume of fuel available to fires

waste control, good storage arrangements for materials and the like.Other contractors are unknown quantities and may represent a greater degree of riskby not exercising good controls in these key areas. This may make the likelihood of afire greater and may increase its extent and the value of damage it is likely to cause.The standard method does not deal specifically with likelihood, but does deal withextent and value, both of which could be increased to allow for the higher levels of

risk associated with unknown contractors.

Condition:-Non-combustible construction for the building fabric, with adequate passive fireprotection in place at the time of the PML scenario fire.

Commentary:-Deviation from either of these is likely to have a dramatic effect on the degree ofdamage the structure is likely to suffer. At the extreme, timber-framed buildings arelikely to suffer 100% losses through their full height, as the frame is likely to burn

away completely in a fire, leading to a total loss of the building. Unprotectedsteelwork, unless it is part of a deliberately fire-engineered solution, is likely to suffer


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collapse if exposed to fire for a protracted period, with large extents of damagesuffered as a result. Normally, only the steelwork of the upper storey and roof is leftunprotected (there being no requirement to protect it in most country buildingstandards/codes) so only this part is at risk, but if late installation of fire protection onlower floors is accompanied by high fire loads, more extensive collapse could be the

result.

Condition:-A low volume of combustible materials incorporated in fixtures and fittingsimported during the latter part of the construction phase and/or the fit-out stage

Commentary:-Combustible fixtures and fittings furniture and the like could allow rapid firespread through open doorways, vertical shafts etc. left/wedged open for access orsnagging or completion of commissioning of services etc. This would serve to make

the extent of fire spread and damage greater than predicted by the standard methodand should be allowed for where it is known to be likely.

Condition:-Adequate response from the fire brigade/department, and adequate supplies of fire-fighting water available

Commentary:-Where one or both of these is lacking, the spread of fire is likely to be greater thanthat predicted by the standard method. Collapse may be indicated, but experience

tends to suggest that structures with good passive fire protection in place wouldsuccessfully be able to survive burn-out of normal construction materials

Condition:-Good subdivision of the building horizontally by solid floors, and no atria

Commentary:-Some penetration of floors by stairs, lifts, service ducts and risers is envisaged, but notthe more substantial holes left by atria and the like. Where those features are present,the fire should be allowed to spread upwards freely inside the atrium to affect all

floors that open into it, with 70% damage caused on all floors affected.Where an atrium extends up to the roof, so does the fire see example A below.Where the atrium is capped by a solid floor slab, fire spread can be limited to theheight of the atrium plus one floor above see example B below unless by applyingthis rule the fire reaches the sixth floor above ground level, in which case the firemust then be allowed to burn upwards in an uncontrolled way to affect the fullheight of the building, as per the standard high-rise method see example C below.In applying this rule for atria, the damage to the building is to be assessed as:-

70% of the value of each floor directly affected by the fire, plus 20% of the value of the two floors directly above the fire and 10% of all floors

above that for smoke damage, plus

15% of the value of all floors below the fire for water damage


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Collapse is still not considered to be likely, for the reasons stated previously.

70 70 7070 70 7070 70 70

70 70 7070 70 7070 70 7070 70 70

20 20 20 70 70 7070 70 70 70 70 70

70 70 70 70 70 70 70 70 7070 70 70 70 70 70 70 70 7070 70 70 70 70 70 70 70 70

70% 60% 70%

Example A Example B Example C

The results produced by this analysis should be considered in conjunction with theresults obtained for the same building by using the standard method.Consider, for example, a low-rise building with a full-height atrium. Using the rulesset out above the degree of damage would be predicted as 70% of the superstructure

value, whatever the building height. For buildings having 1, 2, 3 and 4 storeys,however, the standard method predicts 100%, 100%, 83% and 75% respectively. Inthese cases the larger figure should be used. At five storeys the standard method

predicts 60% but the atrium method predicts 70%, so the presence of the atriumdominates.

Special cases not covered by the General Conditions applicable to the method (set outin Section 2.5.1):-

Sites containing buildings with inadequate separation distances. Use the methodoutlined in the paper, but use the full value of the Target Risk in the calculation,rather than the value of just one building.

Buildings having combustible materials in the frame or fabric.Where the combustible elements are spread throughout the building, then the size ofthe loss must be expanded to become 100% of the value at risk in the Target Risk.

Where the extent of those materials is more limited, the areas containing them shouldbe rated at 100% and their value added to the figures calculated for the non-combustible part in the standard manner.If, however, the non-combustible part is supported by the combustible part (unlikely)then a 100% loss of the whole structure is likely, to allow for the risk of completecollapse.

Buildings having high volumes of combustible materials incorporated in the fixturesand fittings.The same considerations apply as outlined in the preceding paragraph.


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Lack of adequate response from the fire brigade (defined as brigade attendance notlikely within 15 minutes of call-out) or lack of adequate fire fighting water supplies.The fire must be assumed to spread uncontrollably and cause a full-value loss in theTarget Risk.

Lack of adequate subdivision between floors inside the building i.e. presence ofsignificant floor openings like atria.In such circumstances the method outlined above for buildings containing atira.

It is acknowledged that the methods set out in this document vary from currentpractice in the Property Conservation discipline, mainly in respect of floor openings,

which exist on every construction site through most of the duration of theconstruction programme, and would be seen in the Property discipline as a certainroute for the passage of fire from one floor to another. In the Construction Insurance

discipline the presence of a certain number of floor openings of limited size is seen asbeing acceptable, provided the General Conditions set out in Section (2.5.1) of thispaper are complied with. This reflects the fact that most modern construction siteshave a much lower fire load in most areas than an equivalent finished and occupiedbuilding does. In Construction we therefore rely on the lack of continuity of fireload on the sites we insure to protect them from fire spread, rather than solid, un-breached compartment walls or floors.


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APPENDIX E

The Effect of Phased Handovers

On many projects, parts of the building(s) are completed and handed over to the

Construction Client while other parts are still being built. This can have the effect ofreducing the overall value at risk, and lowering the PML. In order to determine theeffect of phased handovers the flow of money through a project must be considered, inthe form of a cumulative spending curve.

Experience shows that the typical curve for the construction of a building is as shownbelow:-

Cost

Simplified cost curve

Actual cost curve

Time

The spending typically follows an S-shaped curve, commencing at a slow rate while thejob is in the ground, accelerating through frame construction, installation of externalcladding and waterproofing and construction of internal walls, accelerating further asservices installations and first-fix finishes go in, then slowing down as testing,commissioning and finishing stages are reached.

For our purposes, a straight-line approximation of this curve is sufficient when carryingout PML assessments. It does lead to an over-estimate of the spending in the early stagesof the project and an under-estimate in the latter stages but, in reality, it is nowhere nearas pronounced as is suggested by the graph above and is judged to be within the normalmargins of error for the method employed.

The use of this simplified curve allows us to examine the effect on the PML of plannedearly completions and phased handovers. Consider the case of the two buildings used inthe example earlier in this module, Block A and Block B. Suppose that Block A wasbegun first and Block B some time later, and that Block A was due to be completed andhanded over some time before Block B was finished. A graphical representation of thatsituation would appear as shown below:-


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+

Cost of A

Project PML A

Cost 0

B Time

Cost of B

+

The project PML for this case is the value of Block A at handover, plus the value of BlockB at the same time, as predicted by the graph of rate of spending on the project.

Using this method of presentation, it is possible to analyse quite complex projects withmultiple handovers on multiple dates:-

Cost

D EMLC

BA

Time

In this example, Blocks A, B, C and D are judged to be sufficiently close to one anotherto be regarded as all being within the Target Risk. Construction of Blocks A, B and C

begins concurrently, each one of them having a different duration. C is finished first andhanded over. B is finished some time after that and is also handed over. Construction ofBlock A continues. Block D is begun some time after Blocks B and C have beenfinished, perhaps relying on the sale or rental income derived from B and C to provide itsfunding. D finishes before A and is also handed over.

The value at risk, as shown by the graph, fluctuates through the contract period, risingfrom nothing at the start to a fist peak immediately before the handover of Block A,then falls back. It rises to a second, lower, peak immediately before the handover ofBlock B, then falls back again. The PML for the project, as shown on the graph, isgenerated by the full value of Block D, plus the proportion of the value of Block A thathas been spent/installed at the time of the handover of Block D.


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APPENDIX F

Calculating EMLs for Buildings Undergoing Alteration or Refurbishment

The Works

The calculation of a PML for the works in a building undergoing alteration orrefurbishment essentially follows the process outlined above, but with the importantproviso that the nature, condition and role played by the existing structure has to beconsidered as a factor. The extent and influence of that factor is best illustrated by twoexamples, at opposite ends of the spectrum:-

Example 1Consider a project involving the demolition of the whole of the structure of an

existing building, except the brick and stone faade on one of its sides, which is to beretained and incorporated in the new scheme. The new works consist of theconstruction of a new building, on new foundations, to which the existing faade willthen be connected in order to provide it with its lateral restraint.

In this example, the characteristics of the new works will dominate the PMLcalculation, and all of the processes outlined above will apply to the newconstruction. The presence of the existing structure will be a minor considerationand will only be relevant if it has some feature which, in the opinion of theUnderwriter or Risk Engineer, enhances the risk presented by the PML scenario ifit was constructed entirely or mostly from combustible materials, for example, it

would play a major role in development of the PML scenario and thereforedevelopment of the PML assessment.

Example 2Consider a project where the work involves the refurbishment of an old tea

warehouse and its conversion into open-plan offices. The existing building has solidbrick external walls, timber floors throughout, supported internally on exposed castiron columns and beams. Construction works comprise:-minor structural repairs to brick work, lintels and some of the cast iron elements;replacement of a limited amount of rotted timber mainly in the roof structure;

installation of new services throughout; installation of new toilet and kitchen facilitiesand the installation of a new lift in the existing lift shaft.

In this example, the characteristics of the existing building will dominate the PMLcalculation. The presence of the timber floors means that, in a fire, the whole of thebuilding would be lost. As the insured works are likely to be spread throughout thebuilding, the PML here would almost certainly be 100%.


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The Existing Structure

The method to be used here is broadly similar to that outlined above, but with additionalconsiderations to be taken into account.

As was stated in Module 10 (Existing Structures), the extent of the insurance cover forthis class is varied sometimes being provided on an all risks basis, and sometimes onlyfor specified perils. When calculating an PML for existing structures, the Underwriter orRisk Engineer must take into account the scope and extent of cover provided, in thecontext of the work that is being done on the site. To illustrate the principles involvedhere, the two examples set out above will be used again.

Example 1Consider a number of possible scenarios:-

If the cover was on an all risks basis, then all aspects of the work being done onthe site would need to be considered, including vibration damage fromdemolition activities, the strength and suitability of the temporary worksproviding lateral restraint while and after demolition was carried out, any riskpresented by foundation works either directly on the faade itself, or for thenew building behind it, the likely effect of fire etc.

If the cover was limited, to, say, just storm, then the only aspect to be consideredwould be the temporary works providing lateral restraint, and its ability towithstand the loads imposed by high winds.

If the cover was all risks and the new building had a reinforced concrete or fullyprotected steel frame, then the risk of collapse of the retained faade would be

very low, as the risk of collapse of the new building would be judged to besimilarly low, and the faades restraint would be maintained.If, however, the frame of the new building was to be constructed from timber,then the risk of collapse of the faade in a fire would be high, and the PML

would probably be set at 100%.

These examples are intended to show that in this case it is the features and propertiesof the work being done that affects the risk to the existing structure, rather than the

nature of the existing structure itself.

Example 2In this case it is the features and properties of the existing structure itself thatdominates the risk, rather than the nature of the works being done in or to it. Thepresence of the high fire loads the timber floors and roof structure representsautomatically makes the PML scenario fire and leads to the calculation of a highPML.


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APPENDIX G

LIMITATIONS

Lateral Fire Spread

Everything set out above deals only with vertical fire spread, but does not address theissue of lateral spread, which is also important. In the Property Conservation discipline,fire is considered to spread laterally without restraint, until it reaches either the outeredge of a building from which it cannot spread further (due to the existence of adequateseparation distances to the next building) or a satisfactory fire-break wall. This is basedon the reasonable assumption that, in an occupied building, there will be a continuousfire load in all throughout the compartment or building being considered.

In construction it is reasonable to use the same assumptions when either thecompartment or building being considered is small, or when there is, or is likely to be, a

continuous fire load throughout. There are cases, however, when it would beunnecessarily onerous to calculate PMLs on that basis, and a less conservative approach iswarranted. Features that are associated with buildings where this approach (i.e. lessconservative) can be taken are set out below. Realistically, for this approach to beapplicable, all or most of these features would need to be present at the same time.

Buildings that are long in comparison to their width, so that fire can only effectivelyspread in one direction, making it easier for the brigade to set up a place where itsspread can be stopped

Buildings that are being finished to shell and core stage only, with little or no finishingworks being done on the floors outside the service cores, or where finishes on thefloors are limited to non-combustible materials only i.e. plastered walls, metal ceilingtiles in metal grids, metal tile raised floors with no finishes (carpet) etc.

Buildings with no temporary building

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